Food Security Bill & Vote Bank Politics – Costly Affair

The Food Security Bill passed by means of an Ordinance, without even tabling in the Parliament as it would attract Debate and Press Coverage on How it will Drain the Indian Central Treasury by over Rs 125,000 Cr every year will prove expensive for the Nation as it is evident that the Corrupt Congress Government wants Votes in the five state elections in Q4-2013 and general elections in mid-2014.

Agriculture to Suffer The agricultural sector will continue to be weighed down by fiscal distortions, as the NFSB focuses on subsidies rather than investment in agriculture. Given the existing inadequate infrastructure, HIGH CORRUPTION in the process of food distribution and significant leakage in the current distribution mechanism, doubts about the quality of delivery to the targeted recipients are high.

The inflationary impact of this bill will eventually be significant to be borne by tax Paying and Hard Working Indians. The NFSB could increase demand-side inflationary pressures on non-cereal food products as households put their savings on cereals towards more protein-rich food products. Without a corresponding effort to increase supply of other food products, the supply/demand mismatch may boost inflation in protein-rich items. Also, distribution will continue to be done through the inefficient existing Targeted Public Distribution System (TPDS) – under which an estimated 40-50% of the food does not reach the intended recipients. This may increase wastage and add to supply challenges.

It is politically difficult for parties in both the coalition government and the opposition to vote against such a populist bill, but the opposition is likely to protest its adoption through an ordinance. This increases the chances of another unproductive parliament session starting later this month. month. Meanwhile, chances of progress on important bills like the increase in the FDI limit for pensions and insurance appear low.